Lease vs. Purchase
TITLE: LEASE VS. PURCHASE
POLICY NO: P-293
SUBMITTED BY: R. BRADLEY &
APPROVED BY: D. SABEL
Effective Date: 6/07 Supersedes No: 9/92 Page No 1 of 1
The purpose of this policy is to provide a policy for lease/rental vs. purchase of equipment.
The University normally encourages the outright purchase of equipment as opposed to lease, lease-purchase, rental, or rental-purchase agreements. In most situations, the outright purchase will prove to be the most economical if calculated over the useful life of the product.
The Procurement Professional may find certain situations that warrant further investigation of lease or rental options. These situations are summarized as follows:
A. Short-term or seasonal needs for equipment may dictate that purchase is unreasonable. If the period of need for the equipment is substantially less than its anticipated useful life expectancy, then rental or lease options should be investigated and compared to the purchase cost less the anticipated resale value.
B. In case of highly technical equipment whose useful life cannot be accurately projected, lease or rental options offered through the manufacturer, the distributor or third parties may be investigated, as a viable alternative to purchase. In such situations analytical comparisons of purchase, lease or rental options should be made to determine which represents the best interest of the University. Purchasing Services will consult with the Office of Treasury Operations in their analyses.
C. Ancillary benefits of the lease or rental (maintenance costs, upgrades, vendor promotions, special marketing incentives) and situations where the net additional cost of lease or rental is less than the cost of money make that type of arrangement the more prudent investment.
When initiating a requisition for the lease, lease-purchase or long-term rental of equipment, the originating department should clearly explain the necessity or desirability of that type of arrangement.
If these alternate arrangements have been identified for major equipment purchases only because of the lack of current funding, other options such as those described below need to be explored.
Departments, schools, or divisions should first attempt to find the necessary funds from internal resources. If no such internal options exist, the Office of Treasury Operations will evaluate existing payment options to determine the most effective course of action for the University. The Purchasing Department will assist by obtaining bids for all payment alternatives available and by assisting the customer department and the Office of Treasury Operations in the evaluation process. If it is determined that a loan option is cost effective, the department head should request approval through the appropriate Dean or Director. The Provost will be responsible for approving the purchase and recommending to the Vice President for Business Services that a loan be made.
If the loan is approved, the Comptrollers Office or the Office of Treasury Operations (depending on fund source) will work with the appropriate business office to issue and account for the loan.